Economic Elasticity M1-05

Chapter 5

Elasticity1) AM05 \ C \\ Concept of Elasticity \ 1 \\

Expressed numerically, the ratios of proportional changes in related variables are known as:(a) interdependency coordinates.(b) best linear unbiased estimators (BLUE).(c) elasticity coefficients.(d) relative betas.(e) beta feedback estimates.

2) AM05 \ C \\ Price Elasticity of Demand \ 2 \\

The price elasticity of demand is the relative proportional change in the:(a) quantity of a good demanded yielded by a given absolute price change.(b) price generated by a given change in quantity demanded.(c) quantity of a good demanded divided by a very small price change.(d) percentage of income spent on a good as its price changes.(e) demand for a good associated with a 1 % increase in income.

3) AM05 \ B \\ Price Elasticity of Demand \ 2 \\

A rough estimate of the price elasticity of demand is best calculated by the absolute value of the formula:(a) change in P / change in Q.(b) % change in Q / % change in P.(c) % change in Q / % change in income.(d) % change in P / % change in Q.

4) AM05 \ C \\ Arc vs. Point Elasticity \ 2 \\

Measures of arc price elasticity tend to be more precise and accurate than measures of point price elasticity because:(a) arc elasticity is more sensitive to the dependent variable.(b) point elasticity is more sensitive to the independent variable.(c) arc elasticity measures don’t depend on whether variables begin at the higher or lower

initial prices or quantities.(d) point elasticity is most accurate only when one of the variables is constant.

Ralph Byrns Chapter 5: Elasticity Test Bank One 1

5) AM05 \ E \\ Price Elasticity: Absolute Values \ 2 \\

The type of elasticity that economists commonly state as an absolute value because it is typically negative is the:(a) price elasticity of supply.(b) income elasticity of demand.(c) price-cross elasticity of supply.(d) price-cross elasticity of demand.(e) price elasticity of demand.

6) AM05 \ B \\ Substitution and Elasticity \ 2 \\

The absolute value of the price elasticity of demand is usually greater if there:(a) are fewer uses for the good.(b) is more time allowed for buyers to adjust.(c) are fewer substitutes for the good.(d) is a lower elasticity of supply.

7) AM05 \ C \\ Substitution and Elasticity \ 2 \\

The absolute value of price elasticity of demand tends to be lower:(a) the greater the number of substitutes available.(b) the more important the product is in typical budgets.(c) for necessities than for luxury items.(d) when more time is allowed to adjust to price changes.

8) AM05 \ B \\ Elasticity: Generic Calculations \ 3 \\

When the temperature drops from 102o F to 54o F, only diehard surfers buy surf boards and sales plummet from 56,000 down to 14,000 monthly. The temperature elasticity of the demand for surf boards is:(a) 0.975.(b) 1.95.(c) 3.90.(d) -1.95.

© 2008 EconomicsInteractive.com Contemporary Economics Test Bank One 2

Figure A0509

9) AM05 \ A \ A0509 \ Elasticity \ 3 \\

Because this demand curve for DVD games is a straight line, its slope:(a) is constant, but the absolute value of price elasticity of demand falls as output rises.(b) varies to compensate for changes in elasticity.(c) is constant, but price elasticity of demand rises as the price falls.(d) and price elasticity are both constant.

10) AM05 \ B \ A0509 \ Price Elasticity of Demand Computations \ 3 \\

The price elasticity of demand for DVD games between prices of $30 and $40 is approximately:(a) 3/7.(b) 7/3.(c) 1/21.(d) 21.

11) AM05 \ A \ A0509 \ Price Elasticity of Demand Computations \ 3 \\

At a price of $50, the demand for DVD games is approximately:(a) perfectly elastic.(b) perfectly inelastic.(c) unitarily elastic.(d) relatively inelastic.

12) AM05 \ B \ A0509 \ Price Elasticity of Demand \ 3 \\

At a price of $0, the demand for DVD games is approximately:(a) perfectly elastic.(b) perfectly inelastic.(c) unitarily elastic.(d) positively sloped.


13) AM05 \ C \ A0509 \ Price Elasticity of Demand \ 3 \\

At a price of $25, the demand for DVD games is approximately:(a) perfectly elastic.(b) perfectly inelastic.(c) unitarily elastic.(d) positively related to supply.


Lowering prices will increase total revenue from DVD game sales at all prices:(a) on this demand curve.(b) below $25.(c) above $25.(d) below $30.

15) AM05 \ A \ A0509 \ Price Elasticity of Demand \ 3 \\

On this demand curve, the demand for DVD games is perfectly elastic at a price of:(a) $50.(b) $25.(c) $20.(d) None of the above.

16) AM05 \ D \ A0509 \ Total Revenue and Elasticity \ 3 \\

Price hikes for DVD games will boost total revenue as long as the price is:(a) located on this demand curve.(b) above $30.(c) below $30.(d) below $25.


Computing the price elasticity of demand for DVD games for a price change from $50 to zero on this demand curve is:(a) 0.(b) infinity.(c) almost meaningless because elasticity changes continuously over this range.(d) 1.5.


18) AM05 \ D \\ Substitution and Elasticity \ 2 \\

The price elasticity of demand is likely to be greater the:(a) more widely the good is viewed as a necessity.(b) better the available alternatives for producers.(c) higher the opportunity costs of production.(d) larger the number of uses for the good.(e) more numerous are complements for the good.

19) AM05 \ B \\ Linear Demand Curves and Elasticity \ 2 \\

As price falls and quantity rises along a negatively-sloped linear demand curve:(a) total revenues fall until elasticity equals zero, then it rises.(b) demand is decreasingly price elastic.(c) there is a contradiction to the law of supply.(d) the incentives for substituting away from the good rise.(e) its constant negative slope ensures a constant price elasticity.

Figure A0520

20) AM05 \ D \ A0520 \ Price Elasticity of Demand: Computations \ 3 \\

Suppose many students have fixed “pizza budgets.” As the price per slice falls from $10 to $1 along this demand curve for pizza per week near a college campus, the price elasticity of demand for pizza:(a) rises towards infinity.(b) falls towards zero.(c) rises, then falls.(d) always equals 1 and demand is unitarily elastic.


21) AM05 \ B \ A0520 \ Total Revenue and Elasticity \ 2 \\

A price hike from $4 to $5 per slice of pizza causes total revenue to:(a) fall.(b) remain constant.(c) rise.(d) It is impossible to tell from these data.

22) AM05 \ C \ A0520 \ 2 \\ Total Revenue and Elasticity \ 3 \\

A price increase from $6 to $8 would result in:(a) a decrease in total revenue.(b) an increase in total revenue.(c) no change in total revenue.(d) consumers buying more pizza.(e) pizza parlors selling more pizza.

23) AM05 \ D \ A0520 \ Total Revenue and Elasticity \ 2 \\

As the price falls along this demand curve for pizza, total revenue:(a) falls.(b) rises, then falls.(c) rises.(d) does not change.

24) AM05 \ C \ A0520 \ Slope and the Elasticity of Demand \ 3 \\

As the price falls and quantity demanded increases along this demand curve for pizza, the slope:(a) is constant and elasticity falls.(b) and elasticity are constant.(c) increases and elasticity is constant.(d) and elasticity increase.


On this demand curve for pizza, demand is:(a) elastic for all prices and quantities shown.(b) unitarily elastic for all prices and quantities shown.(c) elastic at high prices and inelastic at low prices.(d) inelastic at all prices and quantities shown.


Figure A0526

26) AM05 \ D \ A0526 \ Price Elasticity of Demand \ 2 \\

A constant price elasticity equal to one for socket sets would be most plausible for demand curve:(a) D1D1.(b) D2D2.

(c) D3D3.

(d) D4D4.

(e) D5D5.

27) AM05 \ E \ A0526 \ Price Elasticity of Demand \ 2 \\

In this figure showing hypothetical demands for socket sets, demand curve:(a) D1D1 is perfectly price-inelastic.(b) D2D2 is perfectly price-elastic.(c) D3D3 has a price elasticity coefficient of one.(d) D4D4 has a price elasticity coefficient of infinity.(e) D1D1 is perfectly price-elastic.


The demand curve for socket sets from the list below that is least consistent with the law of demand is:(a) demand curve D1D1.(b) demand curve D2D2.

(c) demand curve D3D3.

(d) demand curve D4D4.


29) AM05 \ D \ A0526 \ Price Elasticity of Demand \ 2 \\

The curve that is so inconsistent with standard consumer theory that, based only on the substitution effect, it could not possibly be a demand curve for any standard kind of consumer good is:(a) curve D1D1.(b) curve D2D2.

(c) curve D3D3.

(d) curve D4D4.

(e) curve D5D5.

30) AM05 \ C \\ Price Elasticity of Demand: Computations \ 3 \\

Two thousand four hundred [2,400] students subscribed to cable TV services when they enrolled as freshmen. Eight hundred [800] students dropped the service when the price of cable rose from $25 to $35 per month. The absolute value of the price elasticity of demand for cable TV among these college freshmen is:(a) 2.0.(b) 1.5.(c) 1.2.(d) 1.0.(d) 0.8.

31) AM05 \ A \\ Linear Demand Curves and Elasticity \ 3 \\

If a demand curve is a negatively-sloped straight line, demand is perfectly:(a) elastic where quantity demanded is zero.(b) elastic where price is zero.(c) inelastic where quantity demanded is zero.(d) elastic or inelastic at all points.

32) AM05 \ C \\ Linear Demand Curves and Elasticity \ 2 \\

Every negatively sloped linear demand curve has:(a) variable slope.(b) price elasticity coefficients that increase as the price falls.(c) price elasticities that range from zero to infinity.(d) a price elasticity of one at all points.(e) an inelastic region above the midpoint.

33) AM05 \ A \\ Slope and Elasticity \ 2 \\

On a horizontal demand curve:(a) demand is perfectly elastic.(b) demand is perfectly inelastic.(c) the elasticity of demand varies.(d) demand is unitarily elastic.


34) AM05 \ A \\ Slope and Elasticity \ 2 \\

Of the following price elasticities [ed] for market demand curves, the one that is absolutely implausible from the vantage of standard economic theory would be one for which, across all conceivable ranges of prices:(a) ed= 0 and the demand curve is vertical.(b) 0<ed<1 and the demand curve is relatively steep.(c) ed= 1 and the demand curve is a rectangular hyperbola.(d) ∞>ed>1 and the demand curve is relatively flat.(e) ed=∞ and the demand curve is horizontal.

35) AM05 \ D \\ Price Elasticity of Demand: Computations \ 3 \\

If the rental price of DVDs goes from $2.50 to $.99 and the quantity demanded increases from 510 to 820 then the price elasticity of demand to rent DVDs is:(a) perfectly elastic.(b) perfectly inelastic.(c) relatively elastic.(d) relatively inelastic.

36) AM05 \ B \\ Total Revenue and Elasticity \ 2 \\

Total revenue can be calculated by the formula:(a) P + Q.(b) P * Q.(c) ep * P.(d) ep * Q.

37) AM05 \ A \\ Total Revenue and Elasticity \ 2 \\

When a price hike yields a decline in total revenue, the demand faced by the producing firm is:(a) relatively elastic.(b) relatively inelastic.(c) unitarily elastic.(d) inferior.

38) AM05 \ C \\ Total Revenue and Elasticity \\ 2 \\

If price changes for fresh peaches do not change total revenue to peach farmers, the price elasticity of demand for peaches is:(a) constant along a linear demand curve.(b) infinity (the demand curve is horizontal).(c) unitary (equal to one).(d) zero (the demand curve is vertical).



If cuts in the price of cowboy hats drive down total revenues to hat makers, then demand is:(a) relatively price elastic.(b) relatively price inelastic.(c) unitarily price elastic.(d) infinitely price elastic.(e) zero price elastic.


If the parents of newborns are relatively insensitive to changes in the price of Pampers diapers, then when the price of Pampers increases, total revenue to the:(a) consumer increases.(b) seller increases.(c) consumer decreases.(d) seller decreases.


If reducing ticket prices for Usher concerts increases total revenues, then the demand for tickets for Usher concerts is:(a) perfectly price elastic.(b) relatively price elastic.(c) unitarily price elastic.(d) relatively price inelastic.(e) perfectly price inelastic.


If when the price falls, total sales revenues rise, the price elasticity of demand is:(a) relatively elastic.(b) relatively inelastic.(c) unitary elastic.(d) zero elastic.(e) inflexibly marginal.

43) AM05 \ E \\ Total Revenue and Elasticity \ 2 \\

The Square-Wheeled Locomotive, the last passenger train to Flatland, Iowa, needs more total revenue. If passengers’ demands for tickets are relatively price elastic, the railroad should:(a) raise the price, but lower it if demand is inelastic.(b) invest more heavily in new tracks and engines.(c) advertise luxury tours in Holiday magazine.(d) lobby Congress for increased subsidies for interstate highways.(e) lower the price.



When total revenue decreases due to an increase in price the firm is operating in the_________ portion of consumers' demand curve.(a) relatively elastic.(b) relatively inelastic.(c) unitary elastic.(d) perfectly inelastic.(e) most profitable.

45) AM05 \ C \\ Competition and Elasticity \ 2 \\

If the U.S. price elasticity of demand for gasoline is 1.0, the price elasticity of demand for gas sold by one of many gas stations along a busy highway is:(a) less than 1.0.(b) 1.0.(c) greater than 1.0.(d) zero.

46) AM05 \ B \\ Slope and Elasticity of Demand \ 2 \\

A demand curve has a slope that would be expressed as -$5/(1 extra ton demanded) if a:(a) 5 % price cut raises quantity demanded by 1 %.(b) $5 price cut increases quantity demanded by 2000 lbs.(c) $5 price hike boosts quantity supplied by 2000 lbs.(d) good has price elasticity of demand equal to 5.

47) AM05 \ B \\ Price Elasticity of Demand \ 2 \\

A price elasticity of demand coefficient of 2.5 roughly means that:(a) quantity demanded rises 1 percent when price rises 2.5 percent.(b) quantity demanded grows 2.5 percent with a 1 percent price cut.(c) price rises 2.5 percent when demand grows by 1 percent.(d) a 2.5 percent increase in supply causes demand to grow 1 percent.(e) profit will rise by 2.5 percent for each 1-percent price hike.

48) AM05 \ A \\ Price Elasticity of Demand Computations \ 3 \\

Suppose annual steel sales double to 80 million tons when the price falls $40 per ton, to $180 per ton. The price elasticity of demand for steel is roughly:(a) 3.333.(b) 10.000.(c) 2.500.(d) 6.667.


49) AM05 \ C \\ Price Elasticity of Demand Computations \ 3 \\

If the prices of generic yachts rise from $500,000 to $600,000, causing annual sales to drop from 30,000 to 10,000, then the price elasticity of demand for these yachts equals:(a) 11.00.(b) 2.75.(c) 5.50.(d) 13.75.

50) AM05 \ B \\ Price Elasticity of Demand Computations \ 3 \\

At P = $100, 50 tons of Garden-Rich fertilizer are demanded in Patagonia; at P = $80, the quantity demanded is 70 tons. The price elasticity of demand for fertilizer is:(a) 5/8.(b) 3/2.(c) 4/5.(d) 2/3.

51) AM05 \ B \\ Price Elasticity of Demand Computations \ 3 \\

If the price Pixie’s Restaurant charges for its famous cheesy fried grits rises from $2 to $4 and quantity demanded falls from 750 to 500 servings per week, the price elasticity of demand over this price range is roughly:(a) 5/3.(b) 3/5.(c) 8/9.(d) 125.

52) AM05 \ C \\ Price Elasticity of Demand \ 2 \\

If the price of Kellogg's Corn Flakes goes up from $1.89 to $2.05 and quantity demanded changes from 250 to 210, then the demand for Kellogg's Corn Flakes is:(a) unitary elastic.(b) relatively inelastic.(c) relatively elastic.(d) perfectly elastic.

53) AM05 \ B \\ Slope and Elasticity \ 3 \\

For every $.10 per gallon hike in gasoline prices, Ima Driver cuts her monthly consumption of gasoline by 5 gallons. The slope of her demand for gasoline is:(a) -1/2 if the change in price is expressed in cents, and - 500 if the change in price is

expressed in dollars.(b) -2 if the change in price is expressed in cents, and -0.02 if the change in price is expressed

in dollars.(c) the same whether price changes are expressed in cents or dollars.(d) Impossible to calculate from the information given.


54) AM05 \ A \\ 2 \\ Price Elasticity of Demand \ 2 \\

When the demand for a good is price elastic, the percentage change in quantity demanded in response to a given change in price is:(a) greater than the percentage change in price.(b) positively related to the change in price only for normal goods.(c) exactly equal to the percentage change in price.(d) negatively related to the change in price only for inferior goods.(e) smaller than the percentage change in price.

55) AM05 \ D \\ Price Elasticity of Demand \ 2 \\

If a 10% hike in the price of paisley socks causes sales to fall by 20%, the demand for these socks is:(a) perfectly inelastic.(b) relatively inelastic.(c) unitarily elastic.(d) relatively elastic.(e) perfectly elastic.

56) AM05 \ A \\ Price Elasticity of Demand \ 3 \\

If technological advances boost both market supply and total revenue in an industry, then:(a) demand is relatively price elastic.(b) the industry is dominated by a monopoly.(c) patenting technological advances ensures economic profits.(d) demand is relatively income inelastic.(d) profit is reinvested into more capital.

57) AM05 \ A \\ Price Elasticity of Demand \ 3 \\

If technological advances in agriculture generate bumper crops of farm products for which demands are relatively price inelastic, then the:(a) average income of farmers will decline relative to per capita income for the nation.(b) prices of agricultural land will increase proportionally with productivity.(c) prices for farm outputs will increase proportionally faster than outputs grow.(d) farmers’ total income will increase as a share of national income.


Figure A0558

58) AM05 \ A \ A0558 \ Income Elasticity of Demand \ 3 \\

This figure illustrates how consumption of goods A, B, C, and D varies as a family’s income changes. As income increases, the income elasticity of demand is positive but declining for:(a) good A.(b) good B

(c) good C.

(d) good D.

59) AM05 \ B \ A0558 \ Income Elasticity of Demand \ 3 \\

This figure illustrates how the consumption of goods A, B, C, and D varies as a family’s income changes. The income elasticity of demand equals 1 for:(a) good A.(b) good B

(c) good C.

(d) good D.

60) AM05 \ C \ A0558 \ Income Elasticity of Demand \ 3 \\

This figure illustrates how consumption of goods A, B, C, and D varies as a family’s income changes. As income increases, the income elasticity of demand is positive and increasing for:(a) good A.(b) good B

(c) good C.

(d) good D.


61) AM05 \ D \ A0558 \ Income Elasticity of Demand \ 3 \\

This figure illustrates how consumption of goods A, B, C, and D varies as a family’s income changes. Of these goods, the only inferior good is:(a) good A.(b) good B

(c) good C.

(d) good D.

62) AM05 \ A \\ Income Elasticity of Demand \ 1 \\

The income elasticity of demand is a measure of the responsiveness of:(a) demand to changes in income.(b) extra national income as Aggregate Demand grows.(c) supply curves to changes in demand.(d) price to changes in income.

63) AM05 \ E \\ Income Elasticity of Demand \ 1 \\

The income elasticity of demand can be roughly calculated if we know the percentage change in the:(a) quantity of a good demanded yielded by a given absolute change in income.(b) price generated by a given change in quantity demanded.(c) quantity of a good demanded divided by a small proportional change in price.(d) income spent on a good as its price changes.(e) amount of a good sold when there is a small percentage change in income.

64) AM05 \ C \\ Income Elasticity \ 2 \\

An income elasticity of demand for a good equal to 2 means roughly that:(a) demand curves for the good slope upward.(b) the product is an inferior good.(c) each 1% gain in income boosts the amount sold by 2%.(d) a 20% gain in income yields a 1% increase in sales.(e) (% change in Q) / (% change in P) = 2.

65) AM05 \ C \\ Income Elasticity \ 1 \\

If income elasticity of market demand is minus one (-1), the good is an:(a) average good.(b) intermediate good.(c) inferior good.(d) "image" good.


66) AM05 \ D \\ Income Elasticity \ 2 \\

Accurately predicting the effect of economic prosperity on the demand for mass transit would be best facilitated by a good estimate of the:(a) slope of the demand curve for mass transit.(b) price elasticity of demand for mass transit.(c) price cross-elasticity of demand between mass transit and other goods.(d) income elasticity of demand for mass transit.

67) AM05 \ E \\ Income Elasticity: Luxury Goods \ 2 \\

The income elasticities of demand [μ] for items that most people regard as luxuries would probably be in the range:(a) – ∞ < μ < one.(b) – 1 < μ < zero.(c) μ = zero.(d) 0 < μ < 1.(e) 1 < μ < ∞.

68) AM05 \ C \\ Relative Price and Income Inelasticity: Agriculture\ 3 \\

Technological advances have increased agricultural productivity enormously between 1800 and today, and consequently, the relative incomes of family farmers declined dramatically. Hardships endured by American farm families during this period were most directly attributable to:(a) the unionization of migrant agricultural workers.(b) free trade policies that stimulated outsourcing of agricultural work to low wage countries.(c) demands for farm products being relatively price and income inelastic.(d) monopoly power acquired by giant trading firms in international agricultural markets.(e) policies that subsidized the exchange rate of the dollar and reduced farm exports.

69) AM05 \ D \\ Income Elasticity and Population Growth\ 3 \\

For most families in the United States, the income elasticity of demand appears to be lowest, on average, when considering the demand for:(a) better government.(b) environmental quality.(c) education.(d) children.(e) vacations in other countries.


70) AM05 \ E \\ Cross-Price Elasticity: Complements \ 2 \\

The most complementary of the following pairs of goods are:(a) organic vegetables and French fries.(b) polyester fabrics and cotton cloth.(c) transistor radios and televisions.(d) jogging shoes and bicycles.(e) pencils and erasers.

71) AM05 \ A \\ Price Cross-Elasticity \ 2 \\

A price cross-elasticity of demand of -2 between cable TV and VCRs implies that these goods are:(a) complementary goods.(b) substitute goods.(c) negatively related goods.(d) a luxury and a necessity, respectively.(e) both inferior goods.

72) AM05 \ B \\ Price Cross-Elasticities of Demand: Computations \ 2 \\

If the price of thermal underwear is raised from $12 to $18 per pair, causing the quantity of cross country snow skis to decline from 1,200 to 800 pairs yearly, these goods are ____ and the price cross elasticity of demand equals ____.(a) luxuries; 2.00(b) complementary; -1.00(c) substitutes; -2.00(d) normal goods; 0.500(e) substitutes; 1.00

73) AM05 \ D \\ Price Cross-Elasticities of Demand \ 2 \\

Price cross-elasticity of demand measures the relative responsiveness of the quantity sold of a given good to a change in the:(a) price of that good.(b) individual's income.(c) sales of another good.(d) price of another good.

74) AM05 \ D \\ Price Cross-Elasticity of Demand \ 1 \\

Price cross elasticity of demand measures the responsiveness of the:(a) quantity of a good sold to changes in its price.(b) quantity sold to changes in income.(c) price of one good to changes in the sales of another.(d) amount demanded of one good to changes in the price of another good.(e) relative prices of related resources when technology changes.


75) AM05 \ D \\ Price Cross-Elasticity of Demand \ 2 \\

The ratio of the percentage change in the quantity of beef sold over the percentage change in the price of pork is the:(a) price elasticity of demand for beef.(b) price elasticity of demand for pork.(c) income elasticity of demand.(d) cross elasticity of demand.(e) cross elasticity of supply.

Figure A0576

76) AM05 \ A \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The price elasticity of supply is infinite so that supply is perfectly price elastic in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.

77) AM05 \ B \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The price elasticity of supply is unitary in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.


78) AM05 \ C \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The only supply curve that has price elasticity that varies as the price of output increases is in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.

79) AM05 \ D \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The price elasticity of supply is zero so that supply is perfectly price inelastic in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.

80) AM05 \ A \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The supply of textile workers in China is probably most like the perfectly price elastic supply curve in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.

81) AM05 \ B \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The amount of output supplied is precisely proportional to the price so that the price elasticity of supply equals one in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.

82) AM05 \ C \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The quantity supplied is increasingly sensitive as output increases, so that the price elasticity of supply increases as the price increases for the supply curve shown in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.


83) AM05 \ D \ A0576 \ Slope and Price Elasticity of Supply \ 3 \\

The supply curve most consistent with the inelastic supply of land in Antarctica is shown in:(a) Panel A.(b) Panel B.(c) Panel C.(d) Panel D.

Figure A0584

84) AM05 \ B \ A0584 \ Price Elasticity of Supply: Computations \ 3 \\

If a $5 price hike increases the number of tanks of dehydrated water supplied in this market from point a to point b, the elasticity of supply is:(a) 4.5.(b) 3.0.(c) 1.5.(d) 0.5.

85) AM05 \ B \ A0584 \ Price Elasticity of Supply \ 3 \\

Even if a drought reduces supply from S1 to S0, at every point along both of these supply curves, the supply of tanks of dehydrated water is:(a) perfectly price elastic.(b) relatively price elastic.(c) unitarily price elastic.(d) relatively price inelastic.(e) perfectly price inelastic.


86) AM05 \ A \ A0584 \ Price Elasticity of Supply: Computations \ 3 \\

Of all of the identified ranges on these supply curves, the supply of tanks of dehydrated water is most price elasticity between:(a) point a and point b.(b) point b and point c.(c) point c and point d.(d) point d and point e.(e) point e and point f.

87) AM05 \ C \ A0584 \ Price Elasticity of Supply: Computations \ 3 \\

If a $5 price hike increases the number of tanks of dehydrated water supplied in this market from point e to point f, the elasticity of supply is:(a) 2.333.(b) 2.000.(c) 1.667.(d) 1.333.(e) 0.600.

88) AM05 \ E \ A0584 \ Price Elasticity of Supply: Computations \ 3 \\

Of all of the identified ranges on these supply curves, the supply of tanks of dehydrated water is least price elastic between:(a) point a and point b.(b) point b and point c.(c) point c and point d.(d) point e and point f.(e) point g and point h.

89) AM05 \ C \\ Price Elasticity of Supply \ 2 \\

The price elasticity of supply roughly measures the ratio of the relative:(a) profit to the amounts firms supply at various prices.(b) price increase required to induce a firm to increase output.(c) change in the quantity supplied to a relative change in price.(d) change in price divided by the change in the quantity supplied.

90) AM05 \ C \\ Slope and Price Elasticity of Supply \ 3 \\

If the slope of a supply curve that goes through the origin equals one, supply is:(a) price elastic.(b) price inelastic.(c) unitarily price elastic.(d) indeterminate as to elasticity without more information.


91) AM05 \ C \\ Slope and Price Elasticity of Supply \ 2 \\

A supply curve that is:(a) vertical is perfectly price elastic.(b) horizontal is perfectly price inelastic.(c) linear and goes through the origin has a price elasticity of one.(d) rectangularly hyperbolic is also unitarily elastic.(e) trapezoidal is infinitely elastic.

92) AM05 \ D \\ Price Elasticity of Supply Computations \ 3 \\

If increased demand causes the price of prime beluga caviar to climb from $2750 to $3250 per pound and world production consequently rises from 24 to 40 tons annually, this caviar has a price elasticity of supply roughly equal to:(a) 1/3.(b) 1.0.(c) 2.3.(d) 3.0.

93) AM05 \ B \\ Slope and Price Elasticity of Supply \ 2 \\

A perfectly price elastic supply curve is:(a) vertical.(b) horizontal.(c) positively sloped.(d) negatively sloped.

94) AM05 \ C \\ Linear Supply Curves and Elasticity \ 2 \\

Along two supply curves that are straight lines from the origin, the price elasticity of supply:(a) is below 1 for all prices and quantities on both curves.(b) is less for a given quantity along the steeper curve.(c) equals one and is the same along both curves.(d) falls along both curves as output grows.

95) AM05 \ C \\ Tax Burdens: Legal Incidence \ 1 \\

The individual or firm responsible for paying a given tax to the government bears the:(a) stigma of being a tax evader if it is fully forward shifted.(b) full tax burden only if the tax is backward shifted.(c) legal incidence of the tax.(d) reduction in purchasing power because of the tax.


96) AM05 \ C \\ Tax Burdens: Incidence \ 1 \\

The economic incidence of a tax is:(a) identical to its legal incidence.(b) either forward-shifted to suppliers or backward-shifted to consumers.(c) imposed on whoever suffers reduced purchasing power because of the tax.(d) more easily determined than its legal incidence.(e) invariably passed through to consumers.

97) AM05 \ D \\ Price Elasticities and Tax Burdens \ 3 \\

If the ratio of the price elasticity of demand of a taxed good relative to its price elasticity of supply rises, tax:(a) revenue will fall if tax rates are increased.(b) hikes will cause buyer's total outlays to rise.(c) revenue will fall if tax rates are decreased.(d) burdens will be increasingly borne by sellers instead of buyers.

98) AM05 \ B \\ Price Elasticities and Tax Burdens \ 3 \\

Which of the following lists of taxes or taxed goods is probably in correct order from most backward-shifted to most forward-shifted?(a) Tobacco, property, payroll, general sales.(b) Land, payroll, property, tobacco.(c) Tobacco, payroll, corporate income, property.(d) Income, inheritance, gift, sales.

99) AM05 \ B \\ Price Elasticities and Tax Burdens \ 2 \\

A tax will be backward-shifted completely if the:(a) demand curve is vertical and the supply curve is slopes up.(b) demand curve slopes down and the supply curve is vertical.(c) supply curve is perfectly elastic and the demand curve slopes down.(d) price elasticities of both supply and demand equal 1.(e) firms all operate in extremely competitive industries.

100) AM05 \ A \\ Price Elasticities and Tax Burdens \ 2 \\

A tax is shifted forward if the tax burden causes:(a) consumers to pay higher prices.(b) lower purchasing power for the party bearing the legal incidence.(c) workers to experience lower take-home wages.(d) reduced dividends to corporate stockholders.


101) AM05 \ B \\ Price Elasticity of Supply and Tax Burdens \ 2 \\

If firms bear the legal incidence of a tax, it is backward shifted when:(a) firms burden consumers by raising their prices.(b) the tax burden is borne by workers in the form of lower wages.(c) resource suppliers seek higher factor payments to pay the tax.(d) tax revenue generated exceeds expectations.(e) voters reelect the politicians who imposed the tax.

102) AM05 \ D \\ Marginalism \ 3 \\

Most economists believe that people increase an activity if they perceive the expected extra benefits as exceeding the expected extra cost, but reduce their level of an activity whenever they think the benefits from the last few units of the activity are exceeded by the costs of those units. This theory is called:(a) opportunism.(b) populism.(c) satisficing.(d) marginalism.(e) behaviorism.

103) AM05 \ C \\ Law of Equal Marginal Advantage \ 3 \\

The law of equal marginal advantage is violated if people:(a) think that paying a higher price ensures better quality.(b) elect a general as president when war clouds threaten.(c) fail to allocate similar resources in equally valuable ways.(d) supply resources perfectly elastically.(e) must pay higher prices to secure more output.


Economic Elasticity M1-05

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Transcript of Economic Elasticity M1-05